2017 (3) TMI 412 - HC - Central Excise

Interest - section 11AA of the CEA, 1944 - petitioners contends that they were called upon by the Range Superintendent to pay interest allegedly payable under Section 11AA amounting to ₹ 5,98,025.66/. The petitioners pointed out that on receipt of the communication from the Range Superintendent, entire sum of duty was paid. Once that was paid, Section 11AA has no application and to the facts and circumstances of the present case - Held that - Section 11AA could have been invoked only when the sum determined under Subsection (2) of Section 11A has not been paid within three months from the date of the determination. Once this is not the case, then, interest as claimed and by taking recourse to the above provision, was not recoverable - As per the general law and prevailing then, the proceedings for recovery of interest for wrongful withholding of the sum is independent of the action under the Central Excise Act, 1944. There is no provision in the Central Excise Act, 1944 and then prevailing, enabling recovery of such interest. For all these reasons, we hold that the demand for interest in terms of the Central Excise Act, 1944 was not tenable - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to demand for interest under Section 11AA of the Central Excise Act, 1944 and setting aside the order of the 2nd and 3rd respondents.

Analysis:
1. The petitioners challenged the demand for interest under Section 11AA of the Central Excise Act, 1944. The petitioners, a company incorporated under the Indian Companies Act, 1956, disputed the attachment orders dated 25th April 1997 and 19th March 1999 by the 2nd and 3rd respondents. The petitioners had previously filed a Writ Petition in the High Court at Delhi regarding the additional duty of excise on fabrics. The Delhi High Court dismissed the petition on 25th May 1995, after which the petitioners were asked to pay the additional duty. The petitioners claimed they paid the duty and penalty, but later were asked to pay interest under Section 11AA, which they contested.

2. The petitioners argued that Section 11AA was inapplicable as they had already paid the duty and penalty, and the amount was appropriated by the government. They contended that Section 11AA applies when the duty determined under Section 11A(2) is not paid within three months, which was not the case here. The Revenue, however, claimed that the duty was determined earlier, not paid, and interest was levied for delayed payment. They argued that mentioning the wrong provision does not negate the power to levy interest, and the interest was rightfully demanded and recoverable.

3. Section 11AA of the Central Excise Act, 1944 was analyzed, which states that interest is payable on duty not paid within three months of determination under Section 11A(2). The court found that the duty was challenged by the petitioners, stayed by the Delhi High Court, and later paid by the petitioners. The order dated 4th September 1997 confirmed the duty liability, which was already paid by the petitioners. The court concluded that Section 11AA was not applicable in this case, and interest could have been collected under general law, but not under the Central Excise Act, 1944.

4. The court held that the demand for interest under the Central Excise Act, 1944 was not valid, and coercive measures for recovery were improper in law. The Writ Petition was successful, and the amount of interest deposited in the court was to be paid to the petitioners after four weeks. The judgment clarified the application of Section 11AA and the incorrect invocation of interest recovery under the circumstances of the case.